As readers of this blog will know, it is not uncommon for insurers to file declaratory judgment actions in
federal court against a policyholder to determine coverage obligations. Courts even explicitly sanction or advise insurers to file declaratory judgment actions when coverage is questionable. These coverage cases often include litigating the question of whether a duty to defend exists and whether there is any
obligation to provide indemnity to a policyholder.

Occasionally, questions arise as to who is a necessary party in the coverage action. We blogged about that several weeks ago, as reflected in a recent (and I believe, ongoing) case in North Carolina. http://wombleinsurance.blogspot.com/2015/10/scottsdale-ins-co-v-b-fitness-center.html In Scottsdale Insurance v. B&G Fitness Center, the injured tort plaintiffs from the underlying state court action were found to not be required under Federal Rule of Civil Procedure 19 to be parties in the coverage action.

Contrast that with The Medical Protective Company v. Center for Advanced Spine
Technologies, Case No. 1:14-CV-5, United States District Court for the
Southern District of Ohio. There, the insurer
specifically wanted to include all possible known and future
claimants against Dr. Durrani and his practice and have them bound by the judgment. Dr. Durrani — as a
result of fleeing to Pakistan and refusing to participate in American civil
litigation — was not expected to defend the insurance coverage
declaratory judgment and thus the future claimants were necessary
parties. A defendant class action under Rule 23(b)(2) was the procedural
tool that the insurer used to include those parties.

After the defendant class was certified - containing all known patients of Dr. Durrani's practice - the court also ruled that
Dr. Durrani and his practice are waived and are estopped from asserting their
consent to settle rights under the policy. This frees the insurer to
mediate and settle claims under these policies without Dr. Durrani’s
participation and shields the insurer from potential bad faith liability. The
Medical Protective Company v. Center for Advanced Spine Technologies,
(Sept. 23, 2015, S.D. Ohio).